Greece just barred citizens from the landlocked country of Serbia following that state’s declaration of a state of emergency on July 3, 2020. The news comes on the heels of growing COVID-19 numbers in the Balkans, with Serbia currently registering 16,420 cases and 317 deaths. Ironically, Belgrade made the decision on the same day that the International Monetary Fund completed its fourth virtual review under the agreed Policy Coordination Instrument. The report made several key findings and in its conclusion awaits approval by the Executive Management and Executive Board slated for August 2020. It is notable that the review process finished just in time for the Western Balkan state to now be eligible for financial inflows.
According to an official IMF statement released on July 3rd. “To mitigate the economic and social effects of the COVID-19 shock, the authorities deployed a prompt and well-designed policy response. The fiscal package, which includes increased healthcare spending, tax deferrals, wage subsidies, universal cash transfers, and a state guarantee scheme for bank loans to SMEs, is among the largest in emerging Europe. The National Bank of Serbia (NBS) contributed to the response, including by cutting the key policy rate and injecting liquidity in the banking system, while introducing a three-month moratorium on bank loan repayments and further measures to preserve monetary and financial stability.”
The fiscal package, which includes increased healthcare spending, tax deferrals, wage subsidies, universal cash transfers, and a state guarantee scheme for bank loans to SMEs, is among the largest in emerging Europe (IMF 2020)
The IMF began the first of four reviews in the PCI process in December of 2018, at the request of the Serbian government according to an official IMF release. According to the IMF, the PCI Process accomplishes the following:
“The Policy Coordination Instrument (PCI) is a non-financing tool open to all members of the International Monetary Fund (IMF). It enables them to signal commitment to reforms and catalyze financing from other sources. The establishment of the PCI is part of the Fund’s broader effort to strengthen the global financial safety net—a network of insurance and loan instruments that countries can draw on if confronted with a crisis.”
Serbia also finds itself in the midst of contentions between the US and the European Union in handling the ongoing territorial conflict between Serbia and Kosovo. The 1998/1999 Kosovo War that resulted in NATO military involvement and the immigration of thousands of Muslim Kosovars into the American Midwestern homeland, set old battle wounds between the US, EU and NATO for their violent military intervention.
The 1998/1999 Kosovo War that resulted in NATO military involvement and the immigration of thousands of Muslim Kosovars into the American Midwestern homeland . . .
That nasty historical wound alone could be easily reopened in Serbia as it concludes its parliamentary elections on Monday and continues uneasy negotiations over territory despite EU suspicions that the southern European country is moving closer to a more authoritarian government. It is unclear what a more authoritarian government will mean for the nations economic fortunes and its position with the EU moving forward. Negotiations for accession of Serbia to the European Union has been ongoing since 2009. The landlocked nation of just under 7 million citizens has been the subject of a growing diversion between the West and the EU objectives moving forward.
When the UK cast off its EU affiliation via Brexit, the British took on significant US debt despite its own uncomfortably high debt to GDP ratio. Still it was a move that further positioned the EU as an antiquated, perhaps over-saturated union with middling benefits and unsustainable economic costs. The untenable future of a union with such a high debt to GDP ratio, under current COVID-19 financial constraints and growing geopolitical and ideological departures complicates it position with Serbia. Still Serbia may be a desperate acquisition for the EU, despite its unpopular authoritarian leanings, the addition of Serbia as a nation with a relatively lower debt ratio would average out ballooning debt to GDP ratios plaguing the EU and meet its Maastrict Treaty Conditions. Serbia has an average GDP per capita of roughly $7200 USD according to data provided by Trading Economics.
. . . despite its unpopular authoritarian leanings, the addition of Serbia as a nation with a relatively lower debt ratio would average out the ballooning debt to GDP ratios plaguing the EU and meet its Maastrict Treaty Conditions.
That desperation might be further evidenced in its decision on Serbia’s EU Solidarity Fund application. In June Belgrade submitted an application for Fund, which would provide the Balkan nation with additional support for its economy hit with COVID-19. Despite the fact that Belgrade is NOT an EU Member State, it has applied for the loan in the hopes of shoring up its economy and with the knowledge that the faltering EU will likely want to make a show of its viability by honoring the request. Even as states like Greece, Italy and France struggle through austerity measures for financial viability, Serbia may be more likely to secure EU funding help. As Germany has taken the helm of the EU, there is an ardent need to prove the EU’s worth and legitimacy in a post Brexit world where massive debt to GDP ratios, COVID-19 Economic panic and waning participation in multilateral conventions are growing. It will be interesting to see how Serbia manages its relationship with the IMF and the EU as well as political tinkering by US diplomatic camps.